Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify NASDAQ Rule 7018 Fees and Establish Fee Tiers for the Execution of Market-on-Close and Limit-on-Close Orders Executed in the NASDAQ Closing Cross and Eliminate the High Volume Market Participant Identifier Program, 28568-28571 [2014-11293]

Download as PDF 28568 Federal Register / Vol. 79, No. 95 / Friday, May 16, 2014 / Notices To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal offices of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–BX–2014–024, and should be submitted on or before June 6, 2014. Act’’) 1 and Rule 19b–4(n)(1)(i),2 an advance notice relating to a proposal to permit OCC to issue senior unsecured debt securities in a private placement offering. Notice of the advance notice was published in the Federal Register on July 15, 2013.3 The Commission did not receive any comments in response to the advance notice. On January 15, 2014, OCC notified the Commission of its withdrawal of the advance notice (SR–OCC–2013–804) from consideration by the Commission.4 The Commission is hereby publishing notice of the withdrawal. By the Commission. Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–11342 Filed 5–15–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–72150; File No. SR– NASDAQ–2014–049] For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.22 Kevin M. O’Neill, Deputy Secretary. Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify NASDAQ Rule 7018 Fees and Establish Fee Tiers for the Execution of Marketon-Close and Limit-on-Close Orders Executed in the NASDAQ Closing Cross and Eliminate the High Volume Market Participant Identifier Program [FR Doc. 2014–11294 Filed 5–15–14; 8:45 am] May 12, 2014. BILLING CODE 8011–01–P Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’), 1 and Rule 19b–4 thereunder, 2 notice is hereby given that on April 30, 2014, The NASDAQ Stock Market LLC (‘‘NASDAQ’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change as described in Items I, II and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–72125; File No. SR–OCC– 2013–804] Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Withdrawal of an Advance Notice in Connection With a Proposed Change to its Operations in the Form of a Private Offering by OCC of Senior Unsecured Debt Securities EMCDONALD on DSK67QTVN1PROD with NOTICES May 8, 2014. On June 10, 2013, The Options Clearing Corporation (‘‘OCC’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 806(e)(1) of the Payment, Clearing, and Settlement Supervision Act of 2010 (‘‘Clearing Supervision 22 17 CFR 200.30–3(a)(12). VerDate Mar<15>2010 20:00 May 15, 2014 Jkt 232001 1 12 U.S.C. 5465(e)(1). CFR 240.19b–4(n)(1)(i). 3 See Securities Exchange Act Release No. 69955 (July 10, 2013), 78 FR 42125 (July 15, 2013), (SR– OCC–2014–804). 4 See Letter from Stephen M. Szarmack, Vice President and Associate General Counsel, The Options Clearing Corporation, to Office of the Secretary, Commission (January 15, 2014). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 2 17 PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change NASDAQ is proposing to modify NASDAQ Rule 7018 fees assessed for execution and routing [sic] securities listed on the New York Stock Exchange (‘‘NYSE’’) and on exchanges other than NASDAQ and NYSE, as well as establishing fee tiers for the execution of Market-on-Close and Limit-on-Close orders executed in the NASDAQ Closing Cross and eliminating the high volume Market Participant Identifier program. While the changes proposed herein are effective upon filing, the Exchange has designated that the amendments be operative on May 1, 2014. The text of the proposed rule change is available at nasdaq.cchwallstreet.com at NASDAQ’s principal office, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, NASDAQ included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose NASDAQ is proposing to amend NASDAQ Rule 7018 to modify NASDAQ Rule 7018 [sic] fees assessed for execution and routing [sic] securities listed on NYSE (‘‘Tape A’’) and on exchanges other than NASDAQ and the NYSE (‘‘Tape B’’), as well as establishing fee tiers for the execution of Market-on-Close and Limit-on-Close (‘‘MOC/LOC’’) orders executed in the NASDAQ Closing Cross. Specifically, NASDAQ is proposing to offer reduced access fees for firms that execute against resting midpoint liquidity for both Tape A and Tape B securities. The standard access fees are currently $0.0030 per executed share, but the Exchange proposes to reduce this fee for Tape A and Tape B securities to $0.0027 per executed share. The Exchange believes that the proposed discounted executions for taking E:\FR\FM\16MYN1.SGM 16MYN1 EMCDONALD on DSK67QTVN1PROD with NOTICES Federal Register / Vol. 79, No. 95 / Friday, May 16, 2014 / Notices midpoint liquidity will encourage firms that are interested in accessing more of the NASDAQ’s price improving liquidity access [sic] more resting midpoint liquidity before routing to other destinations. Additionally, the Exchange is proposing to establish new fee tiers for the execution of MOC/LOC orders executed in the NASDAQ Closing Cross. The new tiers are designed to reasonably raise revenue, benefit market participants that provide liquidity during market hours and the opportunity to lower the proposed price changes by executing more volume via the NASDAQ Closing Cross. The Exchange proposes to begin offering tiers for the execution of MOC/LOC orders as follows: • Tier A: Shares of liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs that represent above 1.40% of Consolidated Volume or MOC/LOC volume above 0.50% of Consolidated Volume: $0.00065 per executed share • Tier B: Shares of liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs that represent above 0.80% to 1.40% of Consolidated Volume or MOC/LOC volume above 0.30% to 0.50% of Consolidated Volume: $0.0011 per executed share • Tier C: Shares of liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs that represent above 0.50% to 0.80% of Consolidated Volume or MOC/LOC volume above 0.10% to 0.30% of Consolidated Volume: $0.0012 per executed share • Tier D: Shares of liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs that represent above 0.30% to 0.50% of Consolidated Volume: $0.0013 per executed share • Tier E: Shares of liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs that represent above 0.015% to 0.30% of Consolidated Volume: $0.00135 per executed share • Tier F: Shares of liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs that represent 0.00% to 0.015% of Consolidated Volume: $0.0014 per executed share • Tier G: Member adds Nasdaq Options Market Customer and/or Professional liquidity in Penny Pilot Options and/ or Non-Penny Pilot Options of 0.80% or more of national customer volume in multiply-listed equity and ETF options classes in a month: $0.0010 per executed share. VerDate Mar<15>2010 20:00 May 15, 2014 Jkt 232001 The new fee tiers for participation in the closing auctions essentially replace the high volume Market Participant Identifier (‘‘High Volume MPID’’) program that allowed a member that trades through a qualified High Volume MPID to pay a discounted fee per share executed with respect to executions of MOC/LOC orders when the same High Volume MPID is on both sides of the trade. Since this incentive program has been in place, the Exchange has observed that the High Volume MPID program is not widely-used and so it now proposes the new fee tiers discussed above. The proposed new fee tiers will result in higher fees for most firms, however, the Exchange is offering liquidity adding incentives and MOC/ LOC incentives to materially reduce the proposed fees to be assessed for MOC/ LOC executions in the NASDAQ Closing Cross. Finally, if a member qualifies for two tiers, the lower tier rate will apply. 2. Statutory Basis NASDAQ believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,3 in general, and with Sections 6(b)(4) and 6(b)(5) of the Act,4 in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using any facility or system which NASDAQ operates or controls, and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. This proposal is reasonable, equitable and not unfairly discriminatory for the reasons noted below. The proposed changes are reflective of NASDAQ’s ongoing efforts to use reduced access fees and better targeted discount [sic] to attract orders that NASDAQ believes will improve market quality. Generally, NASDAQ seeks to provide customers with discounts that they deem helpful, and to eliminate those that they do not. By offering reduced access fees for firms that execute against resting midpoint liquidity and by replacing the High Volume MPID program with the new fee tiers for participation in the closing auction, NASDAQ believes it will be able to further promote these goals by providing better targeted incentives for market participants. Specifically, the proposed changes are consistent with statutory requirements. The proposal to reduce access fees for firms that execute against resting midpoint liquidity from the standard access fee of $0.0030 per executed share 3 15 4 15 PO 00000 U.S.C. 78f. U.S.C. 78f(b)(4) and (5). Frm 00097 Fmt 4703 Sfmt 4703 28569 to $0.0027 per executed share for Tape A and Tape B securities is consistent with a fair allocation of reasonable fees and not unfairly discriminatory because it is a price cut that applies uniformly to all NASDAQ members. NASDAQ believes that the fee reduction will incentivize firms to execute against midpoint liquidity and this, in turn, will lead to an increase in price improvement liquidity and price improvement generally benefits the investing public. The impact of the change in adding new tiers for participation in the NASDAQ Closing Cross will be a price increase for many market participants, but those that provide greater liquidity during market hours or increase their usage of the NASDAQ Closing Cross will receive a greater discount. Generally speaking, the base rate will increase from $0.0010 to $0.0014 per executed share as discussed more fully below, but the Exchange is providing various incentives to all market participants to lower the fees to be assessed for MOC/LOC executions. The Exchange’s proposal to establish Tier A in which shares of liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs that represent above 1.40% of Consolidated Volume or MOC/LOC volume above 0.50% of Consolidated Volume will be executed at $0.00065 per share is equitable and not unfairly discriminatory because all market participants have the opportunity to achieve this tier if they choose to increase added [sic] liquidity or MOC/ LOC volume. The fee is reasonable because it represents a price reduction when compared to the current rate of $0.0010 per executed share and is approximately the average rate paid by those market participants that chose to avail themselves of the High Volume MPID discount. The Exchange’s proposal to establish Tier B in which shares of liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs that represent above 0.80% to 1.40% of Consolidated Volume or MOC/LOC volume above 0.30% to 0.50% of Consolidated Volume will be executed at $0.0011 per share is equitable and not unfairly discriminatory. While this is a price increase, the Exchange is still providing opportunities for all market participants to reduce the per share rate by adding additional liquidity or executing a greater number of MOC/ LOC shares. The Exchange’s proposal to establish Tier C in which shares of liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs E:\FR\FM\16MYN1.SGM 16MYN1 EMCDONALD on DSK67QTVN1PROD with NOTICES 28570 Federal Register / Vol. 79, No. 95 / Friday, May 16, 2014 / Notices that represent above 0.50% to 0.80% of Consolidated Volume or MOC/LOC volume above 0.10% to 0.30% of Consolidated Volume will be executed at $0.0012 per share is equitable and not unfairly discriminatory because this tier provides additional opportunities for members to reduce the fees to be paid for MOC/LOC executions. The Exchange’s proposal to establish Tier D in which shares of liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs that represent above 0.30% to 0.50% of Consolidated Volume will be executed at $0.0013 per share is equitable and not unfairly discriminatory because this tier provides additional opportunities for members to reduce the fees to be paid for MOC/LOC executions. The Exchange’s proposal to establish Tier E in which shares of liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs that represent above 0.015% to 0.30% of Consolidated Volume will be executed at $0.00135 per share is equitable and not unfairly discriminatory because this tier provides additional opportunities for members to reduce the fees to be paid for MOC/LOC executions. The Exchange’s proposal to establish Tier F in which shares of liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs that represent 0.00% to 0.015% of Consolidated Volume will be executed at $0.0014 per share is equitable and not unfairly discriminatory because the Exchange believes this represents the base rate for utilizing the NASDAQ Closing Cross. The Exchange spends significant testing and regulatory resources, among other resources, to ensure that the NASDAQ Closing cross [sic] is the industry standard. The Exchange believes that this proposed rate properly reflects that ongoing investment. Further, the Exchange is offering a variety of incentives that are discussed above and below for market participants to reduce their costs [sic] adding additional liquidity or increasing volume in the NASDAQ Closing Cross. The Exchange’s proposal to establish Tier G in which a member adds Nasdaq Options Market Customer and/or Professional liquidity in Penny Pilot Options and/or Non-Penny Pilot Options of 0.80% or more of national customer volume in multiply-listed equity and ETF options classes in a month will be executed at $0.0010 per share is equitable and not unfairly discriminatory because this provides an additional means for members to reduce their fees assessed for executions in the NASDAQ Closing Cross. Like the other tiers offered, this tier enhances market VerDate Mar<15>2010 20:00 May 15, 2014 Jkt 232001 participants’ choices to earn price cuts. They can add more liquidity on the Exchange or its options platform or they can use the NASDAQ Closing Cross instead of potential off-exchange alternatives. Volume-based discounts such as the fees associated with the new tiers for participation in the Closing Cross proposed here have been widely adopted in the cash equities markets, and are equitable because they are open to all members on an equal basis and provide discounts that are reasonably related to the value to an exchange’s market quality associated with higher levels of market activity, such as higher levels of liquidity provision and introduction of higher volumes of orders into the price and volume discovery processes of the Closing Cross. NASDAQ further notes that it operates in a highly competitive market in which market participants can readily favor competing venues, or in this case, internalize orders rather than exposing them to the broader market, if they deem fee levels at a particular venue to be excessive. NASDAQ believes that the new fee tiers will help ensure that its Closing Cross continues to attract high levels of participation. Additionally, the elimination of High Volume MPID program is consistent with a fair allocation of reasonable fees and not unfairly discriminatory since the removal of the rule language pertaining to the incentives impacts all firms equally. B. Self-Regulatory Organization’s Statement on Burden on Competition NASDAQ does not believe that the proposed rule changes will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended.5 NASDAQ notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, NASDAQ must continually adjust its fees to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own fees in response, and because market participants may readily adjust their order routing practices, NASDAQ believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited. In this instance, discounted executions for taking midpoint liquidity, as well as the replacement of the High Volume MPID program with the establishment of new fee tiers for the execution of MOC/LOC orders executed in the NASDAQ Closing Cross reflect this. Accordingly, NASDAQ does not believe that the proposed changes will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing change has become effective pursuant to Section 19(b)(3)(A) of the Act,6 and paragraph (f) 7 of Rule 19b–4, thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NASDAQ–2014–049 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NASDAQ–2014–049. This file number should be included on the subject line if email is used. 6 15 5 15 PO 00000 U.S.C. 78f(b)(8). Frm 00098 Fmt 4703 7 17 Sfmt 4703 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f). E:\FR\FM\16MYN1.SGM 16MYN1 Federal Register / Vol. 79, No. 95 / Friday, May 16, 2014 / Notices To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal offices of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–NASDAQ–2014–049, and should be submitted on or before June 6, 2014. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.8 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–11293 Filed 5–15–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–72151; File No. SR– NASDAQ–2014–048] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Consolidate Certain Committee Functions Into the NASDAQ Review Council EMCDONALD on DSK67QTVN1PROD with NOTICES May 12, 2014. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on April 30, 2014 The NASDAQ Stock Market LLC (‘‘NASDAQ’’ or the ‘‘Exchange’’) filed with the Securities and Exchange CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. Commission (‘‘Commission’’) a proposed rule change as described in Items I, II and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change NASDAQ proposes a rule change to consolidate responsibilities of certain committees of the Board of Directors and to make related changes to the Exchange By-Laws and Rules. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, NASDAQ included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange is proposing to expand the regulatory responsibilities of the NASDAQ Review Council (the ‘‘Review Council’’), a committee of the Exchange Board of Directors (the ‘‘Board’’) not composed solely of Directors, to include responsibilities of other Board committees not composed solely of Directors and consequently sunset those committees. The Exchange’s committee structure and related Exchange By-Laws are largely based on those of NASD (now known as FINRA) and were adopted pursuant to the Exchange’s approval as a national securities exchange.3 The Exchange is proposing to make its committee structure more efficient and effective by vesting the Review Council, which is a committee of the Board with both adjudicatory and policy responsibilities, with the adjudicatory responsibilities of the Market Operations Review Committee (‘‘MORC’’) and with the advisory role of the Market Regulation Committee. 8 17 1 15 VerDate Mar<15>2010 20:00 May 15, 2014 3 Securities Exchange Act Release No. 53128 (January 13, 2006), 71 FR 3550 (January 23, 2006). Jkt 232001 PO 00000 Frm 00099 Fmt 4703 Sfmt 4703 28571 Review Council The Review Council is a Board committee charged with considering and making recommendations to the Board on policy and rule changes relating to business and sales practices of members and associated persons and enforcement policies, including policies with respect to fines and other sanctions. The Review Council is also an adjudicatory body, responsible for the review of appeals of disciplinary proceedings, statutory disqualification proceedings, or membership proceedings.4 In addition, the Review Council may review offers of settlement, letters of acceptance, waiver and consent, and minor rule violation plan letters, exercises of exemptive authority, and such proceedings or actions as may be authorized by the Exchange’s rules. The Review Council is comprised of no fewer than eight and no more than twelve members, whereby at least twenty percent of the members must be nominated by the Board’s Member Nominating Committee.5 Moreover, the Review Council must have at least three Public members,6 as defined in the ByLaws, and the number of Non-Industry members 7 shall equal or exceed the sum 4 Decisions issued by the Review Council may be reviewed by the Board. See, e.g., Rule 9351. If the Board does not call the proceeding for review, the proposed written decision of the Review Council shall constitute the final disciplinary action of NASDAQ for purposes of Exchange Act Rule 19d– 1(c)(1), unless the Review Council remands the proceeding. See, e.g., Rule 9349(c). 5 Pursuant to the By-Laws, the Board’s Member Nominating Committee is responsible for the nomination of candidates for each Member Representative Director position on the Board that is to be elected by Nasdaq Members or the Company Member under the terms of the LLC Agreement and the By-Laws, and shall nominate candidates for appointment by the Board for each vacant or new position on the Nasdaq Listing and Hearing Review Council, the Nasdaq Review Council, or other committee that is to be filled with a Member Representative member under the terms of the ByLaws. See Exchange By-Law, Article III (6)(b). Further provided by the By-Laws, the Member Nominating Committee shall consist of no fewer than three and no more than six members, and all members of the Member Nominating Committee shall be a current associated person of a current Nasdaq Member. See Exchange By-Law, Article III (6)(b)(iii). 6 ‘‘Public member’’ means a Nasdaq Listing and Hearing Review Council member, Nasdaq Review Council member, or member of any other committee appointed by the Board who has no material business relationship with a broker or dealer, the Company or its affiliates, or FINRA. See Exchange By-Law, Article I (z). 7 ‘‘Non-Industry member’’ means a Nasdaq Listing and Hearing Review Council member, Nasdaq Review Council member, or member of any other committee appointed by the Board who is (i) a Public member; (ii) an officer or employee of an issuer of securities listed on the national securities exchange operated by the Company; or (iii) any other individual who would not be an Industry member. See Exchange By-Law, Article I (w). E:\FR\FM\16MYN1.SGM 16MYN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 79, Number 95 (Friday, May 16, 2014)]
[Notices]
[Pages 28568-28571]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-11293]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72150; File No. SR-NASDAQ-2014-049]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify NASDAQ Rule 7018 Fees and Establish Fee Tiers for the Execution 
of Market-on-Close and Limit-on-Close Orders Executed in the NASDAQ 
Closing Cross and Eliminate the High Volume Market Participant 
Identifier Program

May 12, 2014.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), \1\ and Rule 19b-4 thereunder, \2\ notice is hereby given 
that on April 30, 2014, The NASDAQ Stock Market LLC (``NASDAQ'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change as described in Items I, II and 
III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    NASDAQ is proposing to modify NASDAQ Rule 7018 fees assessed for 
execution and routing [sic] securities listed on the New York Stock 
Exchange (``NYSE'') and on exchanges other than NASDAQ and NYSE, as 
well as establishing fee tiers for the execution of Market-on-Close and 
Limit-on-Close orders executed in the NASDAQ Closing Cross and 
eliminating the high volume Market Participant Identifier program.
    While the changes proposed herein are effective upon filing, the 
Exchange has designated that the amendments be operative on May 1, 
2014.
    The text of the proposed rule change is available at 
nasdaq.cchwallstreet.com at NASDAQ's principal office, and at the 
Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NASDAQ included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of those statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant parts of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NASDAQ is proposing to amend NASDAQ Rule 7018 to modify NASDAQ Rule 
7018 [sic] fees assessed for execution and routing [sic] securities 
listed on NYSE (``Tape A'') and on exchanges other than NASDAQ and the 
NYSE (``Tape B''), as well as establishing fee tiers for the execution 
of Market-on-Close and Limit-on-Close (``MOC/LOC'') orders executed in 
the NASDAQ Closing Cross.
    Specifically, NASDAQ is proposing to offer reduced access fees for 
firms that execute against resting midpoint liquidity for both Tape A 
and Tape B securities. The standard access fees are currently $0.0030 
per executed share, but the Exchange proposes to reduce this fee for 
Tape A and Tape B securities to $0.0027 per executed share. The 
Exchange believes that the proposed discounted executions for taking

[[Page 28569]]

midpoint liquidity will encourage firms that are interested in 
accessing more of the NASDAQ's price improving liquidity access [sic] 
more resting midpoint liquidity before routing to other destinations.
    Additionally, the Exchange is proposing to establish new fee tiers 
for the execution of MOC/LOC orders executed in the NASDAQ Closing 
Cross. The new tiers are designed to reasonably raise revenue, benefit 
market participants that provide liquidity during market hours and the 
opportunity to lower the proposed price changes by executing more 
volume via the NASDAQ Closing Cross. The Exchange proposes to begin 
offering tiers for the execution of MOC/LOC orders as follows:

 Tier A: Shares of liquidity provided in all securities through 
one or more of its Nasdaq Market Center MPIDs that represent above 
1.40% of Consolidated Volume or MOC/LOC volume above 0.50% of 
Consolidated Volume: $0.00065 per executed share
 Tier B: Shares of liquidity provided in all securities through 
one or more of its Nasdaq Market Center MPIDs that represent above 
0.80% to 1.40% of Consolidated Volume or MOC/LOC volume above 0.30% to 
0.50% of Consolidated Volume: $0.0011 per executed share
 Tier C: Shares of liquidity provided in all securities through 
one or more of its Nasdaq Market Center MPIDs that represent above 
0.50% to 0.80% of Consolidated Volume or MOC/LOC volume above 0.10% to 
0.30% of Consolidated Volume: $0.0012 per executed share
 Tier D: Shares of liquidity provided in all securities through 
one or more of its Nasdaq Market Center MPIDs that represent above 
0.30% to 0.50% of Consolidated Volume: $0.0013 per executed share
 Tier E: Shares of liquidity provided in all securities through 
one or more of its Nasdaq Market Center MPIDs that represent above 
0.015% to 0.30% of Consolidated Volume: $0.00135 per executed share
 Tier F: Shares of liquidity provided in all securities through 
one or more of its Nasdaq Market Center MPIDs that represent 0.00% to 
0.015% of Consolidated Volume: $0.0014 per executed share
 Tier G: Member adds Nasdaq Options Market Customer and/or 
Professional liquidity in Penny Pilot Options and/or Non-Penny Pilot 
Options of 0.80% or more of national customer volume in multiply-listed 
equity and ETF options classes in a month: $0.0010 per executed share.

    The new fee tiers for participation in the closing auctions 
essentially replace the high volume Market Participant Identifier 
(``High Volume MPID'') program that allowed a member that trades 
through a qualified High Volume MPID to pay a discounted fee per share 
executed with respect to executions of MOC/LOC orders when the same 
High Volume MPID is on both sides of the trade. Since this incentive 
program has been in place, the Exchange has observed that the High 
Volume MPID program is not widely-used and so it now proposes the new 
fee tiers discussed above. The proposed new fee tiers will result in 
higher fees for most firms, however, the Exchange is offering liquidity 
adding incentives and MOC/LOC incentives to materially reduce the 
proposed fees to be assessed for MOC/LOC executions in the NASDAQ 
Closing Cross. Finally, if a member qualifies for two tiers, the lower 
tier rate will apply.

2. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\3\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\4\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among members and issuers and other persons using any 
facility or system which NASDAQ operates or controls, and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers. This proposal is reasonable, equitable and not 
unfairly discriminatory for the reasons noted below.
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 78f.
    \4\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The proposed changes are reflective of NASDAQ's ongoing efforts to 
use reduced access fees and better targeted discount [sic] to attract 
orders that NASDAQ believes will improve market quality. Generally, 
NASDAQ seeks to provide customers with discounts that they deem 
helpful, and to eliminate those that they do not. By offering reduced 
access fees for firms that execute against resting midpoint liquidity 
and by replacing the High Volume MPID program with the new fee tiers 
for participation in the closing auction, NASDAQ believes it will be 
able to further promote these goals by providing better targeted 
incentives for market participants.
    Specifically, the proposed changes are consistent with statutory 
requirements. The proposal to reduce access fees for firms that execute 
against resting midpoint liquidity from the standard access fee of 
$0.0030 per executed share to $0.0027 per executed share for Tape A and 
Tape B securities is consistent with a fair allocation of reasonable 
fees and not unfairly discriminatory because it is a price cut that 
applies uniformly to all NASDAQ members. NASDAQ believes that the fee 
reduction will incentivize firms to execute against midpoint liquidity 
and this, in turn, will lead to an increase in price improvement 
liquidity and price improvement generally benefits the investing 
public.
    The impact of the change in adding new tiers for participation in 
the NASDAQ Closing Cross will be a price increase for many market 
participants, but those that provide greater liquidity during market 
hours or increase their usage of the NASDAQ Closing Cross will receive 
a greater discount. Generally speaking, the base rate will increase 
from $0.0010 to $0.0014 per executed share as discussed more fully 
below, but the Exchange is providing various incentives to all market 
participants to lower the fees to be assessed for MOC/LOC executions.
    The Exchange's proposal to establish Tier A in which shares of 
liquidity provided in all securities through one or more of its Nasdaq 
Market Center MPIDs that represent above 1.40% of Consolidated Volume 
or MOC/LOC volume above 0.50% of Consolidated Volume will be executed 
at $0.00065 per share is equitable and not unfairly discriminatory 
because all market participants have the opportunity to achieve this 
tier if they choose to increase added [sic] liquidity or MOC/LOC 
volume. The fee is reasonable because it represents a price reduction 
when compared to the current rate of $0.0010 per executed share and is 
approximately the average rate paid by those market participants that 
chose to avail themselves of the High Volume MPID discount.
    The Exchange's proposal to establish Tier B in which shares of 
liquidity provided in all securities through one or more of its Nasdaq 
Market Center MPIDs that represent above 0.80% to 1.40% of Consolidated 
Volume or MOC/LOC volume above 0.30% to 0.50% of Consolidated Volume 
will be executed at $0.0011 per share is equitable and not unfairly 
discriminatory. While this is a price increase, the Exchange is still 
providing opportunities for all market participants to reduce the per 
share rate by adding additional liquidity or executing a greater number 
of MOC/LOC shares.
    The Exchange's proposal to establish Tier C in which shares of 
liquidity provided in all securities through one or more of its Nasdaq 
Market Center MPIDs

[[Page 28570]]

that represent above 0.50% to 0.80% of Consolidated Volume or MOC/LOC 
volume above 0.10% to 0.30% of Consolidated Volume will be executed at 
$0.0012 per share is equitable and not unfairly discriminatory because 
this tier provides additional opportunities for members to reduce the 
fees to be paid for MOC/LOC executions.
    The Exchange's proposal to establish Tier D in which shares of 
liquidity provided in all securities through one or more of its Nasdaq 
Market Center MPIDs that represent above 0.30% to 0.50% of Consolidated 
Volume will be executed at $0.0013 per share is equitable and not 
unfairly discriminatory because this tier provides additional 
opportunities for members to reduce the fees to be paid for MOC/LOC 
executions.
    The Exchange's proposal to establish Tier E in which shares of 
liquidity provided in all securities through one or more of its Nasdaq 
Market Center MPIDs that represent above 0.015% to 0.30% of 
Consolidated Volume will be executed at $0.00135 per share is equitable 
and not unfairly discriminatory because this tier provides additional 
opportunities for members to reduce the fees to be paid for MOC/LOC 
executions.
    The Exchange's proposal to establish Tier F in which shares of 
liquidity provided in all securities through one or more of its Nasdaq 
Market Center MPIDs that represent 0.00% to 0.015% of Consolidated 
Volume will be executed at $0.0014 per share is equitable and not 
unfairly discriminatory because the Exchange believes this represents 
the base rate for utilizing the NASDAQ Closing Cross. The Exchange 
spends significant testing and regulatory resources, among other 
resources, to ensure that the NASDAQ Closing cross [sic] is the 
industry standard. The Exchange believes that this proposed rate 
properly reflects that ongoing investment. Further, the Exchange is 
offering a variety of incentives that are discussed above and below for 
market participants to reduce their costs [sic] adding additional 
liquidity or increasing volume in the NASDAQ Closing Cross.
    The Exchange's proposal to establish Tier G in which a member adds 
Nasdaq Options Market Customer and/or Professional liquidity in Penny 
Pilot Options and/or Non-Penny Pilot Options of 0.80% or more of 
national customer volume in multiply-listed equity and ETF options 
classes in a month will be executed at $0.0010 per share is equitable 
and not unfairly discriminatory because this provides an additional 
means for members to reduce their fees assessed for executions in the 
NASDAQ Closing Cross. Like the other tiers offered, this tier enhances 
market participants' choices to earn price cuts. They can add more 
liquidity on the Exchange or its options platform or they can use the 
NASDAQ Closing Cross instead of potential off-exchange alternatives.
    Volume-based discounts such as the fees associated with the new 
tiers for participation in the Closing Cross proposed here have been 
widely adopted in the cash equities markets, and are equitable because 
they are open to all members on an equal basis and provide discounts 
that are reasonably related to the value to an exchange's market 
quality associated with higher levels of market activity, such as 
higher levels of liquidity provision and introduction of higher volumes 
of orders into the price and volume discovery processes of the Closing 
Cross. NASDAQ further notes that it operates in a highly competitive 
market in which market participants can readily favor competing venues, 
or in this case, internalize orders rather than exposing them to the 
broader market, if they deem fee levels at a particular venue to be 
excessive. NASDAQ believes that the new fee tiers will help ensure that 
its Closing Cross continues to attract high levels of participation.
    Additionally, the elimination of High Volume MPID program is 
consistent with a fair allocation of reasonable fees and not unfairly 
discriminatory since the removal of the rule language pertaining to the 
incentives impacts all firms equally.

B. Self-Regulatory Organization's Statement on Burden on Competition

    NASDAQ does not believe that the proposed rule changes will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.\5\ NASDAQ notes 
that it operates in a highly competitive market in which market 
participants can readily favor competing venues if they deem fee levels 
at a particular venue to be excessive, or rebate opportunities 
available at other venues to be more favorable. In such an environment, 
NASDAQ must continually adjust its fees to remain competitive with 
other exchanges and with alternative trading systems that have been 
exempted from compliance with the statutory standards applicable to 
exchanges. Because competitors are free to modify their own fees in 
response, and because market participants may readily adjust their 
order routing practices, NASDAQ believes that the degree to which fee 
changes in this market may impose any burden on competition is 
extremely limited. In this instance, discounted executions for taking 
midpoint liquidity, as well as the replacement of the High Volume MPID 
program with the establishment of new fee tiers for the execution of 
MOC/LOC orders executed in the NASDAQ Closing Cross reflect this.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    Accordingly, NASDAQ does not believe that the proposed changes will 
impair the ability of members or competing order execution venues to 
maintain their competitive standing in the financial markets.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing change has become effective pursuant to Section 
19(b)(3)(A) of the Act,\6\ and paragraph (f) \7\ of Rule 19b-4, 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2014-049 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2014-049. This 
file number should be included on the subject line if email is used.


[[Page 28571]]


    To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for Web site 
viewing and printing in the Commission's Public Reference Room, 100 F 
Street NE., Washington, DC 20549, on official business days between the 
hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be 
available for inspection and copying at the principal offices of the 
Exchange. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly.
    All submissions should refer to File Number SR-NASDAQ-2014-049, and 
should be submitted on or before June 6, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
---------------------------------------------------------------------------

    \8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-11293 Filed 5-15-14; 8:45 am]
BILLING CODE 8011-01-P

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